[Click eStock] Amorepacific, Record High Performance Expected This Year Amid China-Originated Tailwind

Expectations for the Lifting of the China-Korea Travel Ban... Duty-Free Store Sales Also Expected to Surge

[Asia Economy Reporter Minwoo Lee] Supported by positive factors such as the lifting of China's ban on Korean content (Hallyu ban) and a boom in duty-free shops, Amorepacific is expected to achieve its highest-ever performance.

On the 22nd, DS Investment & Securities forecasted that Amorepacific would record sales of 6.214 trillion KRW and an operating profit of 627 billion KRW this year. This represents a 9.9% increase in sales and a 37.5% increase in operating profit compared to last year, marking the highest performance in the company's history. This is due to growing expectations for the Chinese government's lifting of the Hallyu ban and record-breaking foreign sales at duty-free shops.

According to the Korea Duty Free Association, the number of foreign visitors to domestic duty-free shops reached 180 million by November last year. Considering this, the annual number of visitors is expected to approach the 20 million level seen in 2016 when the Hallyu ban began. Not only is the number of visitors increasing, but foreign sales are growing even more rapidly. The compound annual growth rate of foreign sales at duty-free shops from 2016 to 2018 exceeded 30%. Last year, it is expected to have surpassed 20 trillion KRW, an increase of about 39%, setting a new record. Since about 30% of Amorepacific's total sales come from duty-free shops and this segment is already growing in advance, it is analyzed that continuous growth is possible in the future.

The increase in Chinese tourists is also a positive factor. The number of Chinese visitors to Korea, which sharply dropped to around 4 million in 2017 due to the Chinese government's Hallyu ban and restrictions on Korean group tours, has gradually recovered to 6 million last year. With growing expectations for the lifting of the Hallyu ban recently, it is analyzed that this year the number will approach the record high of 8 million in 2016. Jaeho Choi, a researcher at DS Investment & Securities, explained, "This year will be the first year in which profit leverage is maximized along with sales growth due to an increase in average selling price (ASP). The product lineup is expanding from mid-to-low-end brands to luxury brands such as Sulwhasoo's high-end 'Jaumsaeng Line' and 'Jinsul Line,' and profitability is expected to improve through restructuring underperforming brands and online-focused marketing."

DS Investment & Securities gave Amorepacific a 'Buy' rating with a target price of 294,000 KRW. The closing price on the previous day was 219,000 KRW.